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Energy Equities Trading Plan for January 27 – 31

I only have time for a quick writup tonight. Spent the day in DC wandering around the city and didn’t see a single protective mask. For all the hype and panic on Twitter, I really expected to see some signs or concern from people. I even went to the Chinatown New Years celebration and not a single protective mask in the large crowd. I guess the hype of Twitter hasn’t reached the real world yet. There’s just such a huge difference between the Twitter world and the real world. Just like World War 3 last week, this too shall pass with a wimper. BTFD.

 

I’ve been waiting on a golden opportunity to load up longer term on energy and the $XOP, and this coronavirus overreaction and hype is a gift. It’s definitely not a gift to people suffering in China, and I definitely sympathize with them. But, you have to take advantage when the market hands you an emotional overreaction based on a totally irrational fear. I think you buy the dip on this one. Let it run its course and then hit it long, and hard.

 

The SPY futures are down about 38 here on Sunday night and I would expect that to get worse. There are a lot of people sitting with very large long positions on the big run up from October. Those guys will start to bail on Monday and things could get ugly. The real trick here is to time it right and NOT BE EARLY.

 

Trading Plan: I’m looking for the market to gap down and take out 19.90, possibly gap as low as 19.50. Once it opens gap down, the panic should set in and take this thing under 19. Last week’s plan was to start a scale in at 20, but that was before the virus scare. I’m going to take advantage of that and probably start the scale in around ~19, possibly sooner if I see it putting in a bottom. If it does find some support in the low 19’s, the bounce could be fast. I’ll hit it with another quarter of a position in the low 18’s. If for some reason we don’t get the gap down or if the gap doesn’t take out 19.90, I’ll probably stand aside for the first hour and see what develops. I’m looking to take advantage of the emotional overreaction and I don’t want to be early if there’s some kind of delayed reaction. If XOP doesn’t drop, I’ll be content to wait it out on the sideline. My fear is that there is a large group of buyers looking to put on the same trade that I’m looking for. If so, I’ll let them all fill first and then see what develops.

 

It’s going to be an emotionally volatile day on Monday. Have a plan and use stops. As for the rest of the week, I really have no clue. This isn’t an normal week and there’s really no way to make a plan for anything after Monday. Each day will have its own plan.

 

My final advice is this: Don’t get sucked into the emotional hype and panic you see on Twitter. That platform is a collection of the most emotional people on the planet and they are all trying to out-hype each other. It’s a great platform for entertainment, but definitely not a source of trading information or news. If you are trading on the ‘news’ you find on Twitter, you will lose.

 

Sorry for such a short writeup this week, didn’t have much time today. Also, there’s really no planning for a day like tomorrow. Sometimes you just have to have a rough plan in mind and just wing it on what you see and feel. I’ll probably be off of Twitter this week, I don’t want anything to affect my entry on this one. Be careful out there tomorrow.

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